This report has cleared the Treasury
Inspector General for Tax Administration disclosure review process and
information determined to be restricted from public release has been redacted
from this document.

This report presents the results of our review to determine
whether the Internal Revenue Service (IRS) had established effective controls
over advance payments made in connection with the Health Coverage Tax Credit
(HCTC) program.We also reviewed
selected samples of Tax Year (TY) 2004 HCTC advance payment-related transactions.

Synopsis

The HCTC was established by the Trade Adjustment Assistance
Reform Act of 2002[1]
to help certain displaced workers and certain retirees pay for their health
insurance by establishing a tax credit for 65 percent of the premium cost for
qualified coverage.The Act also
includes a provision that allows for the incremental advance payment of the HCTC
by the Department of the Treasury directly to a taxpayer’s health plan
administrator.The taxpayer is
responsible for paying the remaining 35 percent of the health coverage premium.In TY 2005, over $70 million in advance
payments were made on behalf of approximately 22,000 taxpayers who either lost
their jobs because of increased imports or for whom pension plans were
terminated by former employers due to severe financial difficulties. To participate in the program, individuals
must first complete an application attesting to their eligibility and provide a
current health coverage invoice.

Generally, adequate procedures and controls have been
established to ensure HCTC advance payment amounts are accurate.We analyzed a judgmentally selected sample of
82 taxpayers for whom advance payments were made in TY 2004 and found the
advance payments were consistent with the application information and
documentation provided by the taxpayers. Also, taxpayers participating in the advance
payment program are notified monthly of the amount and due date of their
portion of the health care premium.

The IRS is continually evaluating the advance payment
process to identify opportunities for improvement.For example, in September 2005, the IRS
implemented a number of systemic improvements to the advance payment program
that should allow it to better identify changes in active participants’
eligibility status. Also, the IRS has adequately
promoted the availability of the advance payment option.Monthly HCTC advance payments made by the
Department of the Treasury increased from $3 million in January 2004 to $6
million in December 2005. Total annual HCTC
advance payments made by the Department of the Treasury similarly increased from
$55 million in TY 2004, the first full year the HCTC advance payment option was
available, to over $70 million in TY 2005.

We did, however, identify three critical areas in which we
believe controls over the HCTC advance payment program need to be
enhanced.First, controls over the
tracking and collection of receivables resulting from advance payments
subsequently identified to have been made in error need to be improved.For example, a review of a judgmental sample
of 52 taxpayers who received erroneous advance payments identified an average
lapse of 479 calendar days between the initial identification of the
potentially erroneous payments and the IRS’ first contact with the taxpayers to
request repayment. The total amount of
the receivables associated with the 52 taxpayers was $73,667.

Second, advance payment program information provided to
taxpayers annually for use in preparing their tax returns is confusing and insufficiently
detailed to readily support the taxpayers’ calculations of any yearend credits
they may be due.Also, the instructions
for the TY 2005 Health Coverage Tax Credit (HCTC) Advance Payments (Form 1099-H)[2]
contained incorrect information regarding key data being reported on the Form. We advised IRS management of our concerns on
January 9, 2006; they agreed with our conclusions and prepared a one-page
notice for inclusion with Form 1099-H for TY 2005.The notice clarified the information provided
on Form 1099-H and included additional instructions regarding how this
information should be used in calculating any yearend credit.

Finally, although the advance payment program provided over
$70 million in advance credit payments in TY 2005, the IRS does not have a
reliable and comprehensive measure of the accuracy of information provided by
taxpayers in connection with their participation in this program.The IRS has evidence suggesting this is a
potential tax compliance issue, by virtue of its study of compliance trends
relating to taxpayers who claimed the credit in TY 2003.The IRS reviewed returns of 2,284 taxpayers
who claimed the yearend credit.These reviews
resulted in the IRS adjusting about one-third of the returns, as 773 credits
worth $3 million were partially or wholly denied. Thus, the IRS needs to commit to an ongoing process
addressing this compliance issue to ensure all taxpayers claiming the HCTC are
properly entitled to and have properly calculated these benefits.

Recommendations

We recommended the Director, HCTC Program, establish general
time standards for the processing of advance payment-related receivables and
develop an audit trail linking advance payment receivables activity with the HCTC
advance payment program taxpayer account ledger.[3]Further, the Director, HCTC Program, should track receivables balances and
recovery rates for both erroneous yearend refunds and erroneous advance
payments, to aid in assessment of whether a change in the treatment of these
types of liabilities is warranted.We
also recommended the Director, HCTC Program, revise Form 1099-H instructions
for TY 2006 and study the feasibility of providing additional information on Form
1099-H to better assist taxpayers in calculating the yearend credit.Finally, we recommended the Director, HCTC
Program, initiate a process providing for routine evaluation of the compliance characteristics
of a representative sample of taxpayers receiving the HCTC through the advance
payment program.

Response

IRS management agreed with all of our recommendations.A manual process that allows the HCTC Program
Office to associate taxpayer receivable records in a subsidiary ledger with the
HCTC advance payment program taxpayer accounting ledger has been
established.The IRS is also taking the
necessary actions to establish general time standards for processing advance
payment-related receivables consistent with IRS Examination function guidelines.Additionally, receivables balances and
recovery rates for advance erroneous payments are currently tracked in a
receivables ledger and are being used to make decisions in the treatment of
repayment activities.The IRS has also revised
Form 1099-H and its associated instructions to clarify the information provided
to taxpayers and is considering seeking the authority to eliminate Form 1099-H
entirely.Finally, the IRS will provide
for the development of a representative sample of taxpayers receiving advance payments,
to evaluate their compliance characteristics.Management’s complete response to the draft report is included as
Appendix IV.

Office of Audit Comment

In our opinion,
eliminating Form 1099-H, as the IRS indicated it is considering, could have an
adverse impact on taxpayers’ ability to accurately calculate any yearend credit
they may be due. Form 1099-H assists
taxpayers by summarizing advance HCTC payments made to the taxpayers’ health
plan administrators. Taxpayers may also claim a credit at yearend for any
payments they made directly to their health plan administrators for eligible coverage provided during the tax year.

Please
contact me at (202) 622-6510 if you have questions or Daniel R. Devlin,
Assistant Inspector General for Audit (Headquarters Operations and Exempt
Organizations Programs), at (202) 622-8500.

The Trade Adjustment Assistance Reform Act of 2002[4]
established the Health Coverage Tax Credit (HCTC) to help certain individuals
pay for health insurance by establishing a tax credit for 65 percent of the
premium cost for qualified coverage.Taxpayers
eligible to claim the credit fall into two categories:

Trade-affected
workers who have lost their jobs because of increased imports or a shift
in production to another country.These taxpayers are classified as either Trade Adjustment
Assistance or Alternative Trade Adjustment Assistance eligible.

Individuals
for whom pensions are being paid by the Pension Benefit Guarantee
Corporation because their pension plans were terminated when their former
employers went bankrupt or experienced other severe financial difficulties.
These individuals must also be at
least 55 years of age and not entitled to receive Medicare benefits.

Individuals receive the HCTC in two ways: in advance on a monthly basis or after the end
of the year when they file their Federal income tax returns. Individuals are not required to itemize
deductions or to owe Federal income taxes to receive the HCTC.The Internal Revenue Service (IRS) provides
the end-of-year HCTC to the taxpayer, while any advance payments made by the
Department of the Treasury on behalf of the taxpayer are paid to the health
plan administrator (HPA) in the form of a premium payment.In Tax Year (TY) 2005, over $70 million in
advance payments were made on behalf of approximately 22,000 taxpayers.For the advance credit, the HCTC program
remits payments directly to the HPA after the taxpayer is accepted for enrollment
in the program.The credit could first
be claimed for the month of December 2002, with TY 2003 being the first full
year for the credit.Advance HCTC became
available in TY 2003.Individuals
receiving the advance HCTC may claim a credit at the end of the year for any
months in which they were eligible for the credit but did not receive it in
advance.

We conducted our review during the
period August 2005 through February 2006 at the HCTC Program Office in Washington, D.C., the
IRS Campus[5]
in Andover, Massachusetts,
and the IRS contractor sites in Reston, Virginia; Houston, Texas; and Waterloo,
Iowa.The audit was conducted in accordance with Government Auditing Standards. Detailed information on our audit objective,
scope, and methodology is presented in Appendix I.Major contributors to the report are listed
in Appendix II.

Advance payments are paid by the HCTC program directly to
the insurer or HPA for individuals selecting the advance payment option.The individual is responsible for paying 35
percent of the health coverage premium, while the Department of the Treasury
provides the remaining 65 percent.The
HCTC program then disburses the full cost of the health care coverage directly to
the insurer or HPA. To participate in
the program, individuals must complete an application attesting to their
eligibility and provide a current health coverage invoice.The day-to-day administration of the program is
handled by a private contractor under the oversight of the IRS HCTC Program Office.

Generally, adequate procedures and controls have been
established to ensure advance payment amounts are accurate.We analyzed a judgmentally selected sample of
82 taxpayers for whom advance payments were made in TY 2004 and found the
advance payments were consistent with the application information and
documentation provided by the taxpayers. Also, taxpayers participating in the advance
payment program are notified monthly of the amount and due date of their
portion of the health care premium.

The IRS is continually evaluating the advance payment
process to identify opportunities for improvement.For example, the IRS carefully evaluated 171 instances
in TYs 2004 and 2005 in which taxpayers for whom advance payments were made were
subsequently determined to have been ineligible for 1 or more advance payments.As a result of these reviews, the IRS implemented
a number of systemic improvements to more timely identify when taxpayers were
no longer eligible to participate in the advance payment program.

Specifically, in September 2005, the HCTC Program Office developed
an automated process to begin systemically identifying and notifying active participants
nearing Medicare eligibility that they will no longer be eligible to
participate in the advance payment program once they become eligible to receive
Medicare benefits.A similar process was
also developed regarding the identification and notification of taxpayers
nearing the end of their Consolidated Omnibus Budget Reconciliation Act of 1985
eligibility, who likewise would be no longer eligible to participate in the
advance payment program.[6]

Finally, the IRS has adequately promoted the availability of
the advance payment option. Monthly HCTC
advance payments by the Department of the Treasury increased from $3 million in
January 2004 to $6 million in December 2005.Total annual HCTC advance payments made by the Department of the Treasury
similarly increased from $55 million in TY 2004, the first full year the
advance payment option was available, to over $70 million in TY 2005.

However, we did identify three critical areas in which financial
controls over the HCTC advance payment process need to be enhanced.

·Controls over the tracking and collection of
receivables resulting from advance payments subsequently identified have been made
in error need to be improved.

Advance
payment program information provided to taxpayers annually for use in
preparing their tax returns is incomplete and confusing.

The
IRS lacks a reliable and comprehensive measure of the accuracy of
information provided by taxpayers in connection with their participation
in the advance payment program.

The statute governing the HCTC does not specify how to
disallow or recover either erroneous yearend or advance payments.All other refundable credits are specifically
addressed in the Internal Revenue Code as being subject to deficiency
procedures, which means they can be disallowed by the IRS only through a formal
examination.However, the HCTC was not
expressly included with other credits in the statute. Accordingly, the IRS has taken the position
that the HCTC, whether paid for a taxpayer in advance or claimed by the
taxpayer at the end of the year on a tax return, can be disallowed without a
formal examination if found to be erroneous.The amount disallowed is treated as an erroneous refund.When the IRS subsequently identifies that an
advance HCTC payment was made erroneously, it establishes a receivable on a separate,
manual ledger maintained by the HCTC Program Office.These receivables are then forwarded to the
IRS Andover Campus Accounts Management branch for collection from the taxpayers.As of January 2006, 165 receivables related
to erroneous advance payments totaling $337,976 had been forwarded to the Andover
Campus Accounts Management branch for collection processing.

As discussed previously, the IRS carefully evaluates
instances of erroneous payments to assess trends and identify areas where
procedures need to be enhanced. However,
our review of controls over the tracking and collection of advance payment-related
receivables identified a number of areas where improvement is needed.

Collection
actions taken on advance payment-related receivables were not always
timely.Our review of a judgmental
sample of 52 taxpayers who received erroneous advance payments, for which
documentation was readily available, indicated there was an average lapse
of 479 calendar days between the initial identification of the potentially
erroneous payment and the first contact of the taxpayers by the Accounts
Management branch to request repayment.The total amount of the receivables associated with the 52 taxpayers
was $73,667.Some of the delay is
attributable to the IRS’ initial lack of a dedicated methodology for collecting
advance payment-related receivables.The IRS informed us it did not anticipate the need for a
methodology for controlling and collecting advance payment-related
receivables when it first established the HCTC program. The IRS is presently reviewing an
additional 274 cases to determine whether any advance payments were made
in error and receivables need to be established. The IRS needs to establish minimum
timeliness standards to guide this process in the future.

The
advance payment program taxpayer account ledger[7]
is not periodically updated to reflect receivable-related transactions, and
an audit trial has not been established between the advance payment
program taxpayer account ledger and the receivables ledger. As a result, advance payment
receivables-related transaction activity is not included in any of the
financial reports produced from the taxpayer account ledger and is
available to program management only on an ad hoc basis.The absence of these key controls decreases
the reliability of the data produced by the receivables ledger.

In addition, a Treasury Inspector General for Tax
Administration report issued in December 2004[8] identified
that the classification of HCTC yearend refund disallowances as erroneous
payments could compromise the collectibility of the assessments because of limited
actions available due to the statute of limitations applicable to this type of
liability. That audit, which focused on
the HCTC claimed at yearend, recommended that the IRS review the legal status
of yearend HCTC disallowances and determine if legislative action is necessary
to change the classification of liabilities relating to the disallowance of
yearend HCTC refunds.This audit
identified similar concerns regarding erroneous advance payment refunds. For example, as of January 2006, the IRS had
already determined that $20,417 (6 percent) of the $337,976 in erroneous
advance payments was uncollectible due to expired statutes.

In response to our prior recommendation, the IRS noted it had
been working with the Office of Chief Counsel to find appropriate methods for
collecting erroneous yearend payments within the context of the existing
law.The IRS further stated it will maintain
that dialogue and determine the need for and/or the possibility of legislative
clarification in that area.In our
opinion, it is critical that the IRS carefully track receivables balances and
recovery rates of both erroneous yearend refunds and erroneous advance payments
as the program matures, to aid in its assessment of whether a legislative
change is warranted.

Recommendations

Recommendation 1:The Director, HCTC Program, should establish an audit trail between the HCTC advance payment program taxpayer
account ledger and the receivables
ledger and develop procedures requiring
the regular update of the taxpayer account ledger with data from the receivables ledger.

Management’s
Response: IRS management agreed
with this recommendation. A manual process
has been established that allows the HCTC Program Office to associate taxpayer
receivable records in a subsidiary ledger with the advance payment program taxpayer
account ledger. The IRS is also
investigating automated solutions for directly updating the HCTC advance
payment program taxpayer ledger that will remove the need for a receivables
subsidiary ledger.

Recommendation 2:The Director, HCTC Program, should establish general time standards for
the processing of advance payment-related receivables.

Management’s
Response: IRS management agreed
with this recommendation and is taking the necessary actions to establish
general time standards for processing advance payment-related receivables
consistent with IRS Examination function guidelines.

Recommendation 3:The Director, HCTC Program, should track receivables balances and
recovery rates for both erroneous yearend refunds and erroneous advance
payments as the program matures, to aid in assessment of whether a change in
the treatment of these types of liabilities is warranted.

Management’s
Response:
IRS management agreed
with this recommendation. The IRS
currently tracks receivables balances and recovery rates for advance erroneous
payments in a receivables ledger. The
data collected in the ledger are being used to assist in making decisions on
the treatment of repayment activities.

HCTC advance payment transaction information is captured,
accumulated, and compiled by a contractor the IRS has tasked with the
day-to-day execution of the advance payment program.Based on this information, the contractor
annually issues a Health Coverage Tax Credit (HCTC) Advance Payments (Form
1099-H)[9]
to program participants for use in preparing their tax returns.Form 1099-H summarizes advance payments made
to the taxpayer’s HPA.Taxpayers may
also claim a credit at yearend for any payments they made directly to their HPAs
for eligible coverage provided during the tax year.When calculating the credit, taxpayers must
first determine the number of months they received eligible coverage.Coverage must have been provided by the first
of any particular month for the taxpayer to be eligible for the program. The next step in calculating the credit is
determining how much was paid by the taxpayer and how much was paid through the
advance payment program for all eligible months.This step is complicated by the fact that
health insurance premiums are frequently paid in the month preceding the
coverage month.

In our opinion, the information provided to taxpayers on
Form 1099-H regarding advance payments is confusing and insufficiently detailed
to readily support the taxpayers’ calculations of any yearend credits they may
be due.Specifically, Form 1099-H
reports only the month and amount of any advance payment(s) made to the
taxpayer’s HPA; it does not provide any information on the coverage period
associated with the payment(s).Also, the
instructions for the TY 2005 Form 1099-H incorrectly inform the taxpayer that
the amounts posted for each month on Form 1099-H reflect only those payments
made by the first of that month, when actually the amount reported for each
month reflects payments made any time during the month.

We advised IRS management of our concerns on January 9, 2006;
they agreed with our conclusions and prepared a one-page notice for inclusion
with Form 1099-H for TY 2005.The notice
clarified the information provided on Form 1099-H and included additional instructions
regarding how this information should be used in calculating any yearend
credit.The IRS informed us that it presently
does not accumulate sufficient data to accurately identify the coverage period
associated with any particular advance payment.

HCTC program participants rely on the information provided
on Forms 1099-H when preparing to claim the credit on their individual income
tax returns.For example, if a taxpayer
enrolls in the HCTC program during the year prior to receiving advance
payments, he or she may be entitled to a credit at the end of the year for
health coverage premiums paid.If the
information provided on Form 1099-H is incorrect, the taxpayer could receive
less credit than that to which he or she is entitled when preparing the
required Health Coverage Tax Credit (Form 8885)[10]
needed to claim the credit.As a result,
taxpayers who lost their jobs due to foreign trade agreements or had their private
employers’ pension plans terminated may not be receiving the full benefits intended
by law.

Recommendations

Recommendation 4:The Director, HCTC Program, should revise Form 1099-H instructions for TY 2006 to clearly indicate what
the amount reported for each month on Form 1099-H actually reflects.In
addition, Form 8885 and associated instructions should be revised to better
explain how the information provided on Form 1099-H is used in claiming the
yearend HCTC.

Management’s
Response: IRS management agreed with this recommendation. The IRS has revised Form 8885 and its
instructions for TY 2006 and revised Form 1099-H and associated instructions.
The HCTC Program Office is also considering seeking authority to eliminate Form
1099-H.

Office
of Audit Comment:In our opinion,
eliminating Form 1099-H, as the IRS indicated it is considering, could have an
adverse impact on taxpayers’ ability to accurately calculate any yearend credit
they may be due. Form 1099-H assists
taxpayers by summarizing advance payments made to the taxpayers’ HPAs. Taxpayers may also claim a credit at yearend
for any payments they made directly to their HPAs for eligible coverage
provided during the tax year.

Recommendation 5:The Director, HCTC Program, should explore the feasibility of accumulating the additional data needed to identify
coverage periods and revise Form 1099-H reporting to include these additional
data.

Management’s
Response:IRS management agreed with this
recommendation and is already gathering this kind of information. In addition, the HCTC Program Office has
already adopted our recommendations to improve the clarity of Form 1099-H.

The advance payment program allows eligible taxpayers to
receive the benefits provided by the HCTC incrementally through the tax year so
they do not have to wait until the end of the year when they file their tax
returns.The yearend tax credit and
advance payment program processes are similar, as both generally rely on the
taxpayers to self-attest their eligibility for the program.To assist taxpayers with the self-attestation
process, the advance payment program application includes a check sheet that summarizes
the eligibility requirements.The
advance payment program also requires taxpayers to submit a copy of their most
recent health coverage invoices with the applications.The program registration application and
associated invoice are reviewed by a customer service representative employed
by an IRS contractor.The IRS informed
us that the purpose of the contractor review is to establish general eligibility
for the program and gather sufficient information to enter the taxpayer into
the program.The customer service
representatives do not confirm in detail all information provided by the
taxpayer on the application, nor do they routinely contact the taxpayer’s HPA
to validate information regarding the taxpayer’s coverage.Taxpayers participating in the advance
payment program are also required to notify the IRS whenever changes occur to
their health coverage policy information.

Although the advance payment program provided over $70
million in advance credit payments in TY 2005, the IRS does not have a reliable
and comprehensive measure of the accuracy of information provided by taxpayers
in connection with their participation in this program.Timely, comprehensive, and reliable
management information is critical to effective program oversight.To study compliance trends relating to
taxpayers who claimed the credit in TY 2003, the IRS reviewed returns of 2,284 taxpayers
who claimed the yearend credit.These reviews
resulted in partial or complete denial of 773 credits totaling $3 million.Approximately 500 examinations are in process
or planned for taxpayers claiming the yearend credit in TY 2004.

The IRS HCTC Program Office informed us that its primary
focus to date, regarding the advance paymentprogram,
has been developing and implementing the program and pursuing systemic
improvements.Without reliable and
comprehensive information regarding taxpayer compliance trends, the IRS HCTC
Program Office can not effectively identify areas that require additional
emphasis during the application review process or where documentation
requirements need to be expanded.

Recommendation

Recommendation 6:To monitor taxpayer compliance trends, the
Director, HCTC Program, should initiate a process providing for routine evaluation
of the compliance characteristics of a representative sample of taxpayers
receiving the HCTC through the advance payment program.

Management’s
Response:IRS management agreed with this
recommendation and has established several initiatives to incorporate process
reviews that monitor compliance trends.
In June 2005, the HCTC program implemented a Vulnerability, Fraud, and
Compliance Gap Risk Assessment process.
A component of this process will provide for the development of a
representative sample of taxpayers receiving advance payments, to evaluate
their compliance characteristics.

The overall objective of this review was to determine
whether the Internal Revenue Service (IRS) had established effective controls
over advance payments made in connection with the Health Coverage Tax Credit (HCTC)
program.To accomplish this objective,
we:

A.Interviewed
HCTC Program Office and contractor personnel to ascertain procedures and
controls over advance payments and associated taxpayer remittances.

B.Performed
an onsite walk-through of the advance payment process and evaluated the status
of controls ascertained above.

C.Analyzed
a judgmental sample of 82 taxpayers for whom HCTC advance payments were made in
Tax Year (TY) 2004.This sample was
selected from a subpopulation of 11,049 of the total 18,784 taxpayers
identified on the IRS Master File[11]
database as having received an HCTC advance payment in TY 2004.The subpopulation was the result of a
programming error that inadvertently excluded cases from our sample
population.Our subsequent detailed
analysis of the range and characteristics of the cases excluded indicated that
their absence had no material effect on the reliability of our sample
results.In addition, we reviewed a
judgmental sample of 52 taxpayers who had received erroneous advance payments
for TY 2004. This sample represented all
erroneous payment receivables for which complete documentation was available at
the time of our testing. As of January
2006, 165 receivables related to erroneous advance payments had been forwarded
for collection processing.Weused judgmental sampling to expedite our
review and because we did not intend to project our results to the entire HCTC
recipient population.

II.Determined whether the IRS had established an effective
methodology to monitor delivery of the HCTC advance payment program.

A.Evaluated
the methodology used to accumulate and compile management information regarding
the HCTC advance payment program.

B.Analyzed
key measures used by HCTC program management to measure program effectiveness.

III.Evaluated HCTC Program Office efforts to educate
taxpayers on the availability of the advance payment program.

As part of our evaluation of controls over HCTC advance
payments, we reviewed computer-processed data from the IRS Master File and the
HCTC advance payment program taxpayer account ledger[12]
relating to TY 2004 advance payments.To
assess the reliability of these data, we tested for missing data, values
outside expected ranges, and dates outside valid time periods.We also compared source documents to the data
to further validate our results.Our
overall purpose in using these data was to test the operation of selected
financial management internal controls, and we did not rely on the data alone
to answer any of our objectives.

Overall, we found the data to be sufficiently reliable to
meet our objective of assessing the operation of controls over routine payment
transactions.However, our overall evaluation
of internal controls over advance payments did identify that certain types of
nonroutine payment-related transactions are not posted to the HCTC advance
payment program taxpayer account ledger.The effect of this control weakness is discussed in detail in the second
finding within the report.

[2] Form
1099-H provides a taxpayer with the total amount of qualified health insurance
payments paid in advance to a qualified health insurance coverage provider by
the Department of the Treasury on the taxpayer’s behalf.

[3] The
system of records on which HCTC advance payment transaction information is
captured, accumulated, and compiled.

[5] The data
processing arm of the IRS.The campuses
process paper and electronic submissions, correct errors, and forward data to
the Computing Centers for analysis and posting to taxpayer accounts.

[6] Pub. L. No. 99-272, Title X, 100 Stat. 82, 222
(1986).The law requires certain
employers with 20 or more employees to offer continued coverage for
individuals, with certain exceptions, who would have otherwise lost
employer-sponsored health coverage.

[7] The
system of records on which HCTC advance payment transaction information is
captured, accumulated, and compiled.

[8]The
Health Coverage Tax Credit Was Accurately Processed During the 2004 Filing
Season (Reference Number
2005-40-017, dated December 2004).

[9] Form
1099-H provides a taxpayer with the total amount of qualified health insurance
payments paid in advance to a qualified health insurance coverage provider by
the Department of the Treasury on the taxpayer’s behalf.

[10] Form
8885 is used by taxpayers eligible for the HCTC during the tax year who have
not claimed the advance HCTC for all eligible months.